Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Davide Campari-Milano NV (DVDCF, Financial) reported a 2.1% organic net sales growth for the first nine months of 2024, driven by global priority brands, particularly in the Americas and EMEA.
- The company is implementing a significant cost containment program aimed at achieving a 200 basis point reduction in SG&A as a percentage of net sales by 2027.
- Espolon tequila showed strong performance, with a 18% growth in the first nine months, outperforming the tequila category in key markets.
- Aperol continues to perform well, with strong growth in the U.S., Canada, and other markets, despite challenging conditions in Italy and Germany.
- The company is reorganizing its operating model to create four houses of brands, which is expected to enhance growth and efficiency by focusing on brand accountability and resource allocation.
Negative Points
- Davide Campari-Milano NV (DVDCF) faced a challenging macroeconomic environment, with poor weather conditions and reduced consumer confidence impacting sales, particularly in Italy and the U.S.
- The company's EBIT margin declined by 4.2% organically over the first nine months, with a significant margin dilution of 140 basis points.
- The third quarter saw a 1.4% organic net sales growth, reflecting a soft market context and supply shortages due to a hurricane in Jamaica.
- The company experienced destocking issues in Italy and unexpected retailer destocking in the U.S., impacting shipment performance.
- The Courvoisier acquisition is generating a lower-than-expected EBIT contribution due to market cleanup and investment needs.
Q & A Highlights
Q: What were the main factors that derailed the quarter's performance compared to the optimistic outlook in July?
A: Paolo Marchesini, Interim Co-CEO, highlighted several factors: the impact of a hurricane in Jamaica, poor weather conditions in September affecting aperitifs, and unexpected destocking in Italy. Additionally, consumer confidence was lower than anticipated, affecting consumption patterns.
Q: Regarding the medium-term outlook, how much of the expected SG&A savings will be reinvested in A&P? Is the historical level of 17-18% of sales for A&P sufficient for growth ambitions?
A: Marchesini stated that the company aims to maintain A&P at around 17% of sales, leveraging efficiencies to increase impact without necessarily increasing the percentage of sales spent on A&P.
Q: Can you provide an update on the CEO search process and the criteria for the new appointment?
A: Marchesini mentioned that the search is progressing well, with both internal and external candidates being considered. The new CEO does not necessarily need to be Italian, but should have an international mindset. The focus is on making the right choice rather than rushing the process.
Q: What is the expectation for organic sales growth in Q4, and what are the prospects for returning to mid- to high single-digit growth in 2025?
A: Marchesini expects Q4 to be positive but not significantly so, given tough comparisons. The company aims for mid- to high single-digit growth in 2025, although the beginning of the year may still be soft due to ongoing market conditions.
Q: How is the U.S. cognac category evolving, and what are the expectations for Courvoisier?
A: Marchesini noted that the U.S. cognac category is experiencing high promotional activity, with high-end cognacs struggling. Courvoisier is primarily focused on the VS segment, which is less affected. The company plans to rebuild brand equity and improve pricing over time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
